The Federal Diary in the 1980s: Tax-free retirement payouts

Our post yesterday looking at the Federal Diary archives on the column’s 80th anniversary dealt with a time when federal worker retirement packages were growing, after the cost of living adjustment was pinned to an inflation rate that went through a few boom years.

Today’s column, reprinted from Nov. 26, 1985, reports on an expected deflation to retirement packages due to a new pension tax reform bill under discussion.

If they’d paid into their retirement funds, retirees would receive their pension tax-free until they’d reclaimed those contributions, usually for a period of 18 months to three years.

But under the proposed new law, feds would be taxed immediately on part of their pension — prorated, somewhat grimly, “on the estimated remaining life of the retiree.” Retirees would pay an estimated $10,000 in that time frame, although they were expected to pay the same amount in taxes over their lifetime.

In the column, diarist Mike Causey wrote that feds could actually breathe easy for a while longer: Congress had tabled any implementation of the change for six months because of concerns that a wave of feds would quickly retire to take advantage of the tax-free status.

And some also thought the extension might go on even longer, once Congress realized exactly what passing the tax change would do to their own, larger salaries.

We’d like to hear from readers about their favorite Diary columns, memorable Diary moments. Write to federaldiary@washpost.com or leave your comments below.